Industry Reports

Deutsche Bank Reports Summaries

080201 Deutsche Bank Report - January Containerboard Monitor

Deutsche Bank - Equity Research

* Shipments Fell Sharply, But Other Metrics Appear Positive

Dec. box numbers show a sharp decline in volumes off a difficult '06 comp.  Inventories remained tight and operating rates decreased slightly.  While the Dec. box number appears disturbingly low, we think that it may be an aberration, rather than the beginning of a sharp drop-off from a slowing economy.  Considering price hikes in the market, we remain positive on containerboard stocks.

* Box Shipments Weak – Somewhat Misleading?

Box volumes fell -6.8% y/y in Dec. (same number of shipping days this year as last).  YTD numbers are down -1.4% on an actual basis and down -2.1% on an avg. week basis.  We note that box producers suggest Jan. volumes have been solid. This assertion is supported by a strong Jan. manufacturing number (50.7).

* Inventories – Still tight

Combined mill and box plant inventories rose 44K tons m/m.  Historically inventories increase 75K tons in Dec.  Measured in terms of weeks of supply, box plant inventories fell from 3.1 to 3.0, one of the lowest levels in history.

* Operating Rates & Trade Flows

Operating rates decreased from 97.9% in Nov. to 97.0% in Dec. For the third straight month, net exports of containerboard declined y/y (-15% in Dec.).  Given continued weakness of the US$, this strikes us as a conundrum.  One wonders if tighter container & ocean freight markets could be constraining export tonnage.

* Prices

Smurfit-Stone is out with a price hike of $50/ton for Mar. 1. We understand that International Paper and Temple-Inland are also out with price hike initiatives.